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View all search resultsThe Purbaya gambit: Can optimism alone revive Indonesia’s economy?
While Purbaya's strategy of optimistic communication is rooted in macroeconomic theory, it would do well to remember that self-fulfilling prophecies can go either way.
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Finance Minister Purbaya Yudhi Sadewa (right) delivers a presentation on Oct. 14, 2025, during a monthly press briefing on the state budget at the Finance Ministry in Central Jakarta. (Antara/Dhemas Reviyanto)
W
hen Purbaya Yudhi Sadewa was sworn in as finance minister on Sept. 8, 2025, he arrived with bold promises and an even bolder communication strategy. His approach was not merely political theater, it was grounded in economic theory; specifically the concept of self-fulfilling prophecies drawn from Roger E.A. Farmer’s seminal work, The Macroeconomics of Self-fulfilling Prophecies (MIT Press, 1993).
As we enter the first quarter of 2026, the question now is whether theoretical optimism can overcome structural economic realities.
Purbaya’s tenure began with ambitious targets that captured public attention. He pledged to achieve 6 percent economic growth in 2026, significantly above the official state budget target of 5.4 percent, and famously declared that he was “ready to be fired” if he failed. He also promised that the economy would show marked improvement within two to three months of his taking office.
To achieve this, he orchestrated the transfer of Rp 200 trillion (US$12 billion) in government funds from Bank Indonesia (BI) to state-owned banks, intending to flood the market with liquidity and stimulate lending. Additional promises included pursuing 200 major tax delinquents with potential revenue of Rp 5.06 quadrillion and writing off debts under Rp 1 million for ordinary citizens to restore their access to banking services. These were not incremental policy adjustments: They were shock therapy designed to jolt Indonesia’s economy out of lethargy.
Yet by mid-January 2026, the gap between promise and performance has become evident.
Economic growth projections from institutions like CORE Indonesia and the Institute for Development of Economics and Finance (INDEF) remain stubbornly anchored between 4.9 percent and 5.1 percent, well below Purbaya’s target. Furthermore, the Sumatra disaster in late November dealt a big blow to the country’s gross domestic product. Purbaya himself acknowledged that fourth-quarter 2025 growth fell short of his initial 5.7 percent projection.
The much-touted liquidity injection has encountered what economists call transmission problems. While bank liquidity has increased, the flow of credit to the real economy has been sluggish due to undisbursed loans: credit approvals that businesses have not yet drawn down. The pursuit of tax delinquents continues, but comprehensive collection results remain unreported. Meanwhile, the debt forgiveness program for small borrowers is still being finalized through interagency coordination.
